Expectation of slower May inflation mounts
THE DEPARTMENT of Finance (DoF) yesterday added to expectations that inflation slowed this month, due to an easing in price increases of vegetables and of many other basic goods.
The latest estimate follows that of the central bank, which last Friday gave a 2.9-3.7% range for May inflation, which the government is scheduled to report on June 6.
In a bulletin submitted to Finance Secretary Carlos G. Dominguez III and e-mailed to journalists, Finance Undersecretary Gil S. Beltran, the department’s chief economist, said he expected inflation to have slowed to 3.2% this month from April’s 3.4%, although the estimate would be a pickup from May 2016’s 1.6%.
Headline inflation has so far averaged 3.2% in the four months to April, against the central bank’s 3.4% forecast and 2- 4% target range for the entire 2017.
“This deceleration may be traced to the easing in food prices, primarily of vegetables, which are forecast to drop from 8.1% to 4.7%. This will cut down food inflation from 4.2% to 3.8%,” Mr. Beltran said in his economic bulletin.
Inflation of rice, however, which accounts for 8.92% of the theoretical basket of goods and services consumed by a typical household and which is used to compute overall annual inflation, is estimated to have picked up 2.4% in May from a 0.8% drop a year ago and April’s 2.3%.
Other consumer price index ( CPI) components that are expected to have seen increases this month from April are housing, utilities and fuels ( 3.7% from 3.6%), as well as restaurants and miscellaneous services ( 1.7% from 1.5%).
CPI components that are expected to have seen price softening are alcoholic beverages and tobacco (6.2% from 6.3%); clothing and footwear (2.3% from 2.7%); electricity, gas and other fuels (8.2% from 8.5%); furnishings and household equipment (2.3% from 2.4%); health (2.4% from 2.5%); transport (2.9% from 3.2%); communication ( 0.2% from 0.3%); as well as recreation and culture (1.4% from 1.5%).
Education remained with 1.8%. The DoF bulletin noted further that the basic rate of Manila Electric Co. — the country’s biggest electricity distributor — fell to P9.60 per kilowatthour (/kWh) in May from P9.89/kWh in April, even as it was still more than P8.40/kWh charged in May last year. Electricity contributes 4.51% to the CPI.
Diesel — used widely for public utility transport — saw price ease to 30.8 per liter in Metro Manila in May from P31.40/ liter in April, though it was still more than May 2016’s P26.40/ liter.
The price of gasoline, however, rose to P45.30/ liter in May from April’s P45.10/ liter and the P40.40/ liter recorded in May last year.
Overall, “[ i] nflation decline will give policy makers adequate room for maneuver to sustain rapid economic growth in the face of another possible adjustment in the Fed rate in June,” Mr. Beltran said in his bulletin.
The Bangko Sentral ng Pilipinas has kept policy steady since September 2014, save for procedural interest rate tweaks in June last year to usher in an interest rate corridor system that is designed to better siphon excess liquidity and influence market rates besides.
The United States Federal Reserve began its ongoing policy tightening run in December 2015 after nearly a decade of near- zero rates put in place to help the US economy then recuperate from the December 2007-June 2009 “Great Recession.”
Since then, the Fed followed its quarter-of-a-basis point hike with increases of similar magnitude in December 2016 and last March.
US monetary authorities have been signalling since late last year that three hikes are in store this year — including the one in March — though at a gradual pace.
The Asian Development Bank said in a briefing in Yokohama, Japan earlier this month that it expected up to four follow-up rate increases from the Fed next year.